Reducing Your Time-to-Market by Transforming Your Processes with Global Services

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By neoIT

Time-to-market reduction is one of the most important and effective ways to increase market share and product revenue. Yet the question of how to reduce time-to-market continues to confound many executives. This article explores one way of reducing time-to-market: process transformation through services globalization, an evolution of offshore outsourcing.

We also explore the question, how can process transformation be done more effectively, more cheaply, and more quickly? We explain how organizations can take advantage of four unique transformative opportunities that services globalization offers.

The Importance of Decreasing Time-to-Market

One of the top concerns for companies developing new products is reducing the time it takes to get the products to market. In fact, our research suggests that reducing time-to-market is a more significant concern even than minimizing development cost.

Figure 1: New product development challenges.

That concern prevails across industries, from telecommunications to consumer goods to media and entertainment because of the dramatic effect that time-to-market has on a company's product revenue.

Figure 2 demonstrates that as time-to-market is reduced, product revenue increases -- more substantially as time-to-market becomes shorter.

Figure 2: Revenue vs. time-to-market.

In fact, companies have reported achieving up to 40% increases in new product revenue by reducing time-to-market by 20% to 30%.

Time-to-market has such an important effect on product revenue because each day that a company's product is delayed getting to market is one less day for the company to accrue revenue. More importantly, if a company can get its product to market before its competitors, each day that it's ahead is one more day to expand market share with less competition.

Of course, the opposite is also true: If a company's competitor gets its product to market first, each day that it's ahead represents a reduction in potential market share for the late-coming product.

Indeed, the final market share of a product is usually determined by the time at which the product achieves volume production compared to its competitors.

As product lifecycles become shorter and shorter, reducing time-to-market becomes even more important.

Leveraging Services Globalization to Decrease Time-to-Market

In an increasingly competitive landscape, companies are always looking for an edge -- a way to reduce time-to-market even by a month or a week.

As client organizations have leveraged services globalization to reduce costs and improve quality, they have also begun to see the potential to leverage services globalization to reduce time-to-market. In fact, our research suggests that more than half (55%) of globalizing client organizations see a reduction in time-to-market as their primary objective in services globalization. Another 25% see it as a secondary objective, and only 20% didn't list it as an objective.

Table 1: Percent of companies listing time-to-market as a given services globalization objective.
Primary objective	55%
Secondary objective	25%
Not an objective	20%

Some client organizations have more actively attempted to leverage services globalization to reduce time-to-market than others. Table 2 shows the industries that have most actively leveraged services globalization for product development.

Table 2: Industry classification of companies leveraging services globalization for product development.
Industry	Percentage
Software & high tech	40%
Manufacturing	25%
Healthcare	20%
Telecom	10%
Others	5%

The software and high tech industries are most actively leveraging services globalization in product development in part because they have a greater need to reduce time-to-market. In industries with short product lifecycles (like the IT industry), reducing time-to-market is most critical. (The need for time-to-market reduction is inversely proportional to the length of the product lifecycle.)

How does a Company Successfully Decrease Time-to-Market?

Despite the fact that organizations recognize the potential for leveraging services globalization to reduce time-to-market, there are no major stories of companies successfully achieving time–to-market reduction in product development. Many organizations carry misconceptions about how to reduce time-to-market.

Misconception 1: The Use of Technology will Automatically Reduce Time-to-Market

Technology is routinely touted as a panacea for business problems. While technology can be very beneficial, it won't do any good if the processes aren't optimized.

Imagine, for example, a company that has spent millions of dollars developing a new technology system to make its global product development processes run more smoothly and more quickly. The company rolls out the new technologies, but its processes don't run any more smoothly or more quickly. The company finds out that the reason its global processes were inefficient and slow was its product development processes themselves -- not its technology. Even as the company had upgraded its technology infrastructure, its product development processes themselves were still designed for large developments involving many lengthy and sequential steps.

As the example demonstrates, technology can help a company's processes run more smoothly and quickly but only if the business processes themselves are optimized.

Misconception 2: Adding More Resources will Automatically Reduce Time-to-Market

Services globalization is traditionally associated with replacing a company's full time employees (FTEs) with offshore FTEs at a lower cost. Theoretically, that cost savings could be used to hire more employees and thereby reduce the time-to-market.

The problem with that assumption is that if a client organization is at the optimal point on its product development curve, adding more employees could actually increase time-to-market.

Figure 3 reveals the product development curve, which depicts the relationship between months in development and employees on the job. The optimal point is at the end of the downward slope and the beginning of the upward slope. At that optimal point, adding more employees won't reduce time-to-market; it will actually increase time-to-market as employees begin tripping over each other.

Figure 3: Product development time.

To the left of the optimal point, adding more employees will decrease time-to-market. If a company is to the left of the optimal point and can only afford to hire more employees by engaging services globalization, then in that case services globalization and the subsequent hiring of more employees at a lower per-employee cost will directly reduce time-to-market.

If, on the other hand, the company is at the optimal point, engaging services globalization to hire more employees won't reduce time-to-market and could increase it.

Moreover, if months-in-development and employees-on-the-job aren't interchangeable, then increasing the number of employees on the job won't decrease the number of months in product development (time-to-market).

Interchangeability only holds in ideal cases where:

• The task is endlessly divisible among the employees.
• There's no communication requirement between employees.
• There's no training requirement for the employees.

Take the example of a widget factory. Each employee is tasked with assembling a portion of the widget. The employees don't have to communicate with each other to assemble the widgets; they assemble their given part of the widget and send it on down the line. There are 10 employees, so each assembles 1/10th of the widget and can do one assembly each day. Therefore, the factory produces one widget a day.

Imagine, then, that the factory hired 10 more employees, who were already well-versed in widget-making and thus required no training. Instead of assembling 1/10th of the widget, each employee now assembles 1/20th and can therefore do each assembly in half of a day instead of a full day. The factory now produces one widget in half of a day; by doubling the number of employees, the factory cut time-to-market in half.

In such a case, where the task is completely divisible (each employee can assemble any fraction of the widget), there's no communication requirement and no training necessary, increasing the number of employees decreases the time-to-market.

But more often than not, the task isn't completely divisible, there are communication requirements between employees and training is necessary. Where there are those kinds of sequential constraints, simply increasing the number of employees won't decrease time-to-market. Take the example of a software company. Production starts with the development engineer, who writes the preliminary code for the software. Nothing else can be done until the preliminary code is written. The time involved in writing the preliminary code involves trial and error, thinking of a new idea, trying it out, then going back to the drawing board; it's not a divisible process between employees. After the preliminary code is written, it's sent to a different group of programmers to be finalized. Finally, the finalized code is sent to be tested. Each tester runs the software through a number of tests.

In the case of the software company, the software development process isn't divisible (tasks such as programming or testing can't be broken down except into sections of code and therefore require a definite number of employees). Furthermore, because the process is sequential and interdependent, communication between employees is critical (between the programmers and testers, for example). Each time the software is passed to a new programmer or tester for the next stage, the employees must catch each other up on the work done to that point. Each time that employees must communicate with each other in this way requires time that ultimately increases the product's time-to-market.

And because software development is a high-skill task, training is required. Training in a high tech industry like software development requires a large investment in employee-hours. The time that the trainer spends training the new employee, again, ultimately increases the product's time-to-market.

In an environment such as the software company, the added time and effort required to hire additional employees could counteract any positive effect those additional employees may have and even lead to an increase in time-to-market.

Misconception 3: For Optimal Reduction in Time-to-Market, Globalize Activities in the Maturity Phase

Globalizing development activities (such as new feature development and technical support) during a product's maturity phase won't yield optimal time-to-market reductions. The opportunity for reduction in time-to-market is actually greatest in the introductory and growth phases of the product lifecycle.

Figure 4: Product development lifecycle.

During the introductory phase of the product lifecycle, the two most important features are basic functionality (the product must resolve the customer's problem) and quick time-to-market. If the competitor's product gets to market first in the introductory phase, reclaiming market share will be more difficult for the late-arriving product.

Table 3: Opportunities for reduction in time-to-market during different lifecycle stages.
Introductory	Growth	Maturity	Decline
High	High	Medium	Low

Once the product has been accepted into the market, the company enters the growth phase of the lifecycle, during which the added value of the product (beyond basic functionality) becomes more important, though quick time-to-market is still important as well.

After the product has established market share and entered the maturity phase of its lifecycle, features such as low defects (maintaining the customer's high opinion of the product) are most crucial; time-to-market is still important, but less so than in the introductory and growth phases of the lifecycle.

Because time-to-market is most important during the initial phases of the product lifecycle, the greatest opportunity to leverage services globalization and reduce time-to-market is during those phases, not during the maturity phase.

Process Transformation as One Successful Method for Reducing Time-to-Market

If using technology, adding more resources, or globalizing mature processes won't automatically reduce time-to-market, then what will?

The answer is that no single activity by itself will automatically reduce time-to-market. What's needed is process transformation, which may or may not involve the activities already described.

Clearly, decreasing time-to-market is about reducing the number of months required for product development. In our discussion about adding more resources, we pointed out that simply increasing the number of people working on product development won't decrease time-to-market if the process is already operating at the optimal point on the product development curve.

So if the organization is already operating at the optimal point on its product development curve, how can it decrease the number of months in product development (time-to-market)? Only by shifting the product development curve downward as demonstrated in Figure 5.

Figure 5: Product development time with transformation.

One way to do that is through process transformation.

For any business process transformation to be successful, it has to be fundamental and radical. If done effectively it could bring about dramatic improvement in performance and reduction in time-to-market.

The following section describes process transformation in more detail as well as how services globalization can be leveraged to allow for process transformation.

Process Transformation and Services Globalization

Process transformation, as we discussed previously, is one way to reduce time-to-market. Can process transformation be done onshore? Sure, but you may be able to leverage services globalization to transform your processes more easily, quickly, effectively, and cheaply than doing it onshore.

Services globalization won't automatically reduce time-to-market. A process that isn't optimized in-house is unlikely to substantially improve if globally sourced, even to a best-in-class vendor.

In order to successfully leverage services globalization to reduce time-to-market, the client organization must adopt a transformational approach to globalization. The organization must have a formal cross-functional product development process roadmap and the discipline to adhere to that roadmap.

The good news is that services globalization can help the client organization transform processes more effectively, more easily, and more cheaply. Services globalization may offer some unique levers that could aid in successful process transformation. Those levers include:

• Time gap between different global destinations.
• Sharing best practices and parallel activities.
• Technology and process alignment, including automation and productivity tools.

These levers can shift the product development curve (as shown in Figure 6), decreasing time-to-market.

Figure 6: Product development time with transformation.

Figure 7 shows the time-to-market difference between a globally transformed process and a typical case. It shows that the transformed process gets product to market 55% more quickly than the typical case without transformed processes.

Figure 7: Possible time-to-market savings using transformation levers.

Table 4 reveals the percent reduction in time-to-market generated by each global transformation lever.

Table 4. Possible time-to-market savings using transformation levers.
Lever	% reduction
Leveraging best practices	18%
Leveraging time gap	16%
Adding more employees	12%
Technology and process alignment	9%

Leveraging Best Practices

One of the fundamental benefits of services globalization is the ability of client organizations to focus on what they do best and outsource those practices that they don't do best to organizations (third-party suppliers, joint ventures or captive centers) that specialize in those processes. In other words, services globalization allows client organizations to develop their own best-in-class processes and source the rest of their processes to service providers who represent best-in-class for those processes.

Leveraging global suppliers' best practices abilities is the largest contributor to time-to-market reductions among the global transformation levers, allowing a company to reduce time-to-market by 18%.

Some of the best practices used to reduce time-to-market in product development include concurrency, multi-tasking and parallel working. Figure 8 demonstrates how leveraging best practices can reduce time-to-market over the typical base case.

Figure 8: Leveraging best practices to reduce time-to-market.

Specifically, leveraging best practices to reduce time-to-market involves:

• Focusing on quick decision making vs. reviewing.
• Adopting a platform approach, including software reuse and scaling processes to fit each particular product.
• Abandoning the one-size-fits-all philosophy; prioritizing products according to their complexity and impact and accelerating product development processes for less complex products.
• Centralizing development processes to ensure faster cross-functional collaboration.
• Focusing on governance and executive championing to ensure best practice procedures are being adhered to.
• Documentation and continuous process analysis.

Furthermore, factors such as ease of use, support for knowledge transfer and collaboration, and effective embedding of development processes into the existing user environment are critical to achieving successful adoption of best practice methodologies.

Leveraging the Time Gap

The time gap advantage follows best practices as the second most effective lever to reduce time-to-market. Time gaps, such as the 12-hour difference between the United States and India -- enable 24/7 operation.

Consider an example. Take a process that has six sequential steps which each takes one eight-hour day to complete. Performing those tasks onshore, in the United States, the process will be completed in six days. But if the process is re-engineered to allow onshore and offshore development, work could be done during the day in the United States and during the US' nighttime (daytime in India), allowing for a 50% reduction in time-to-market.

Figure 9: Reducing time-to-market by mixing offshore and onsite work.

Leveraging Additional People Resources

In our coverage of the misconception that adding more resources will automatically reduce time-to-market, we noted that if an organization isn't operating with the optimal number of employees, time-to-market could be reduced by hiring more employees. When that's the case, services globalization can allow the organization to increase its people resources (the number of employees working on development) at less cost by leveraging wage rate differentials.

Leveraging Technology and Process Alignment

In our coverage of the misconception that the use of technology will automatically decrease time-to-market, we noted that technological advancements won't make processes more efficient unless the processes themselves are transformed. But in combination with process transformation, technology can help an organization reduce time-to-market.

To leverage technology successfully, an organization's product development processes need to be transformed and aligned with changing technologies. Processes need to be redesigned to leverage the faster turnaround times that technology and automation can deliver; manual and routine processes can be automated; and even processes such as manual documentation and recordkeeping can be made redundant by leveraging new technologies.

For example, the automation of certain processes, such as testing, can streamline development. Or the organization can use product lifecycle management software to manage global product development more efficiently.

Technology and process alignment can be leveraged in much the same way as it presents opportunities for leveraging best practices. Suppliers, which are dedicated to providing a certain service, can specialize not only in best practices with regard to that service, but can also develop technology applications and infrastructures specifically designed to make certain processes more efficient. Could a client organization invest in such technologies itself instead of globalizing? It probably could, but at a much larger per-unit cost because the client organization doesn't have the same kinds of economies of scale that the service provider does with regard to that particular process.

Organizations should take care, though, to ensure that suppliers are properly motivated to adopt new technologies and process alignment, perhaps by requiring suppliers to meet certain performance improvement expectations over time.

Applying Levers to Different Models

The client organization's choice of global services model will affect the opportunities that each lever offers for time-to-market reductions.

A captive center is a good option when the client organization has concerns about intellectual property protection, security and availability of skill sets in supplier market (as captives can invest in training employees to meet specific skill requirements that aren't present in the general labor pool). But the captive model constrains the reduction in time-to-market unless continuous efforts are made in improvement of product development process. Captive centers don't enjoy the benefit of sharing best practices across projects and leveraging them to reduce time-to-market.

Third-party suppliers, in contrast, can offer an effective solution when skill sets are readily available and suppliers have maturity in the required area. The client organization could leverage the third party's best practices to optimize product development processes and reduce time-to-market.

A joint venture (JV) can be an effective option in between a captive center and a third-party supplier. A joint venture allows the client organization to maintain a balance between control and the ability to leverage external service provider capabilities. Like captive centers, joint ventures may offer the advantage of the time gap and technology and process alignment in reducing time-to-market. However, sharing of best practices may be limited.

A build-operate-transfer (BOT) arrangement may be effective when the client organization is new to services globalization and lacks the management bandwidth to manage captive operations but wants the benefits of a captive center. In this case, the supplier builds, operates and then transfers the services center in an agreed timeframe. A potential disadvantage of this model is that the supplier may not have much incentive to help the client organization leverage technology and best practices in reducing time-to-market.

Table 5. Opportunities for time-to-market reduction across globalization models.
Levers	Captive	3rd Party	JV	BOT
Time gap	High	Low	High	Medium
Technology	High	Medium	High	Medium
Best practices	Low	High	Medium	Medium

Implementing Global Process Transformation

Global process transformation should be implemented in three phases: design, implementation and management. Figure 10 highlights the key activities within each phase.

Figure 10: Phases of global process transformation.

Key Steps in Global Process Transformation

Listed below are a few guiding steps for the organizations that wish to engage in services globalization process transformation:

• Clearly define objectives; make reducing time-to-market an organizational priority.
• Analyze existing processes.
• Benchmark against best-in-class to identify improvement scope.
• Identify levers of transformation.
• Secure executive sponsorship.
• Hire outside help.
• Identify low hanging fruits which can demonstrate quick results with minimum impact or risk.
• Implement limited transformation.
• Measure results.
• After success with limited transformation, roll out organization-wide transformation.
• Practice continuous governance and improvement.

Consult the Experts

When a client organization is prepared to launch a process transformation, it can be helpful to create a transformation team composed of company insiders who understand the specific processes as well as outsiders (such as consultants) who can think freshly and innovatively outside the confines of the organization and offer the radical approach necessary to successfully transform a process.

Conclusion

To succeed in business, a company must make its products or services cheaper, faster or better (or, preferably, cheaper, faster and better).

Until recently, offshore outsourcing helped companies make products and services cheaper, as organizations leveraged substantial wage rate differentials. But as the trend has matured and evolved into services globalization, the opportunity arose to leverage globalization to make products cheaper as well as faster.

But services globalization does not by itself lead products and services to be developed more cheaply and more quickly; those advantages must be actively pursued by the client organization.

This article specifically focused on one way to actively pursue globalization's reduced time-to-market benefits. Following the prescriptions outlined in this article, your organization will be able to leverage process transformation to reduce time-to-market and thereby increase its market share and revenue.

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http://www.neoit.com

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